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Closing Bell With Maria Bartiromo

News/Business. Maria Bartiromo. Analysis of the day's winners and losers in the stock market. New.

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01:01:00

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mpeg2video

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ac3

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704

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480

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Us 12, Carl Icahn 10, China 8, S&p 8, Apple 8, Ford 6, Max 6, Alex 4, Josh Lipton 4, Retina 3, U.s. 3, Fiona 2, Carlos 2, Derrick Chan 2, Michael Jones 2, New York 2, Batista 2, Michael Thaman 2, Eike Batista 's 2, Kimberly-clark 2,
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  CNBC    Closing Bell With Maria Bartiromo    News/Business. Maria Bartiromo. Analysis of the  
   day's winners and losers in the stock market. New.  

    October 28, 2013
    4:00 - 5:01pm EDT  

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tone for tomorrow. >> i think so. i think the market up 5% or 10% minimum on the s&p. and i think apple will definitely beat. >> we'll find out. should be out any moment. we'll see the dow finishing virtually unchanged in the s&p 500 in all-time high territory. here's the second hour of k "closing bell" with maria bartiromo. i'll see you tomorro 4p it's 4:00. do you know where your money is? it looks like we are closing in unchartered territory once again. even with all of the moves, volatility earlier in the day, it's not ending far from where it started. nasdaq moved into negative territory late in the day, finishing down three points.
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standard & poor's 500, another all-time high tonight at 1762.20. unchartered territory with the standard & poor's 500 with a gain of just a fraction. bob pisani, three more trading days. investors are hanging tough. >> historic highs. the dow transportation index, two indices hitting historic highs. the others aren't far away. i want to point out how amazing the rotation is in the market. consumer staples is now stepped to the fore in the last few weeks to the upside. hersh hershey, kimberly-clark, procter & gamble. put up the consumer names. the s&p is up 4%. look at these names, kimberly-clark, lorillard, clorox, one sector goes down, another sector steps up. almost nothing is down much on the year. take a look at some of the consumer discretionary stocks this month. you see they've stepped back.
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retailers like gap and coach, some of the restaurants like yum brands and some of the other housing names like whirlpool and some home builders are basically flat this month. the market keeps sort of rotating. meantime, a little concern about what's going on in housing land. pending home sales had the biggest drop since may 2010. these are homes under contract. down four straight months. that's not a good looking chart. i was a little surprised at the nbdz today. home builders were down 1%. frankly, i was surprised they weren't down even more. put up some home builders. finally, momentum names are under pressure again. you can see them, tesla, this has been going on three, four, five days in a row. all those stocks to the downside today. back to you. >> bob, thanks much. joining us, katie stockton from btig, willa, steve rosen from hightower and michael jones. good to see, everybody. thanks for joining us. >> thank you. >> katie, let me kick this off with you. we have the fed meeting this
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week. we have no taper on the -- the tapering off the table, everybody says, until 2014. yet the s&p 500 at an all-time high even though earnings have been mixed. what's your take on this market? >> the market has been driven by momentum. momentum is a technical phenomenon. there's plenty of catalysts and reasons to expect a pullback. i'm actually in that camp. i think we'll seal a pullback in the next couple, three weeks or on. for me it's technically driven. it's because we saw a very extreme short term of condition registered. having reached overbought territory on their charts. that's a reading we've seen three times in total this year. each time followed by a pull back. i think we will pull back. the important thing to note is we're at new all-time highs for the s&p 500. it is a momentum-driven market and no reason to fight that momentum with short positions. rather i'd be hedging positions
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that are up near resistance on their charts. >> will, what about you? >> i think it's totally natural to believe there's going to be a pause this week. central bank nonaction, waiting to be confirmed in the october meeting by fed, it will leave people on the sidelines until they actually hear that confirmation. have you to look longer terms in valuation. where the s&p 500 trades today is in line with average. certainly isn't cheap but isn't an impediment to moving higher. longer term, we like equities and owning for the long term. >> so, when you say you want to own equities, then where? what groups do you think lead this market higher if, in fact, we do continue higher? >> sure. recently we've seen a bounceback in a lot of sectors that were more rate-sensitive given a change in expectation for yields over the past six weeks. we're looking at places with top line growth. one sector is technology. you have to buy flook at those
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innovate to top line growth and the other is old line tech. we like them both. the old line tech still has a lot of cash on their balance sheet, paying a good dividend and growing that dividend. frankly the valuation they're trading at isn't trading a lot. >> steven, how are you allocating capital? >> we're utilizing the recent rally in bonds to trim positions there. trying to move some assets into alternative investments. multi-strategy hedge funds, long/short as well as private equity. we like the valuations of the equity markets but the reality is, we had a great year last year in the market. we're up 20-plus perfect, 25% so far this year. so, i think the reality is, is there are some risks to the downside. we'll use some of those downside movements to reallocate capital to the equity markets as well. >> how significant might a downside move be? >> well, we just saw 1650 when the government shut down. at that point in time, we did reallocate capital there.
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i think the reality is, is any single time you get a three to five to 7% pullback in the markets, can you take advantage of it. >> okay. so, if we were -- what i'm asking you, really, is can this market see a substantial selloff even in the face of the fed stimulus in place? >> i think it's very unlikely that we're going to see a substantial selloff in the market. i think there's a lot of people, including myself, that might want to see it, because it would give us great opportunities to go in and buy. but the reality is, is that the fed has their pedal on the metal. they're not going to stop until they feel the economy can stand on its own two feet. >> michael jones -- >> they're not going to taper. >> right. michael jones, weigh in here. how are you allocating? you agree, you want to buy stocks here? >> we believe you get the best example of how powerful the qe in terms of significant pullbacks by contrasting the last budget fiasco in 2011 with this one. we had almost a 20% plunge in the market in 2011. we had a 3%, 4% pull back this
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time. i think it does give you a sense as to when they're pushing the qe, it's hard to get a sustained pullback and it's perilous to fight the fed. but the market has turned from being overly concerned, this summer everyone said september, and now everyone is pushing tapering out to march, even april. i think there's a real possibility the economy sloweded because of government shutdown and rates. if we reaccelerate, tapering comes back on the table and a lot of sectors are not priced for that. >> so, you -- are you saying you want to raise cash here or short or what? >> i think the overall market, it's probably not worth trading that, but i think one of the earlier guests said, it's a good time to reposition in fixed income. if you haven't sold, you probably should. i think the run-up in consumer staples, utilities, all the low
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volatility stocks are basically trading on an expectation that it's qe infinity and tapering isn't going to happen for a long period of time. i think that may be a costly strategy, particularly if the economy shakes off the effects of the shutdown. >> all right. we will leave it there. thanks, everybody. really appreciate it. we'll keep watching that. up next, tick tock on apple earnings. this will set the tone for tomorrow. apple hoepgs the new iphones put a shining on the earnings less to be revealed in less than 20 politics. we have full team coverage from wall street to to silicon valley, instant reaction. also ahead, pending home sales down for the fourth month in a row. up next, owens-corning ceo speaks with me about the state of housing. that company is all about the materials to make homes so they know the real deal. plus -- >> just a question of time. i'm sorry. so, i don't know if i'm going to pass him on the right side or left side, but it's going to happen.
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>> well, that was then. this is now. that was eike batista in 2011. was worth roughly $30 billion. he won't be passing warren buffett any time soon. many expecting his ogx oil company to file for bankruptcy protection imminently. we are going to tell you all about it. and how does that happen? what went wrong? coming up on eike batista's story. with fidelity's guaranteed one-second trade execution, we route your order to up to 75 market centers to look for the best possible price -- maybe even better than you expected. it's all part of our goal to execute your trade in one second. i'm derrick chan of fidelity investments. our one-second trade execution is one more innovative reason serious investors are choosing fidelity. now get 200 free trades when you open an account.
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so far of the s&p 500 companies have posted quarterly results for the third quarter. let's get to seema mody for the major takeaways this far and what they say for the second half. >> here are the major takeaways. first 69 % of companies have beat earnings estimates. analysts say this suggests lower earnings driven by cost cutting. second, cautious outlook for q4. according to thompson reuters we have seen 39 preannouncement. third, the government shutdown has been mentioned as a concern by several firms, according to facts. some mentioned the negative
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impact of the company include citigroup, linea tech and stanley black & decker. now the street is waiting for apple reports. they write regardless if the stock is higher or lower after the report, the next day after earnings, apple trades lower 65% of the time. so, maria, we'll have to see if apple follows history or bucks the trend. >> seema, thank you so much. one company in that 50% is owens-corning which reported third quarter numbers last week. earnings and revenue coming in below expectations for the company. so intre gral to the housing market which makes materials like insulation, so many other materials that go into housing. joining me fresh off ringing the closing bell here at the new york stock exchange, celebrating his company's 75th anniversary, owens-corning ceo, michael thaman. thank you. >> thank you for having me. >> 75 years.
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congratulations to you. >> it's an exciting day for our company. we have a very proud history, done a lot of great things over the 75 years but a lot ahead of us. a little celebration for our employees, customers and retirees and back to work tomorrow. >> good to you. let's talk about what happened last week in terms of earnings and revenue. has it been a tougher period than you expected? what's going on? >> we showed really good growth. all businesses improved. they didn't improve as much as analysts had hoped they would. we're on track with our guidance for the year. now, we had hoped that we would show some pretty big upside to our guidance the at the beginning of the year. we've seen the global economy is a little weaker. we're not seeing big remodeling coming back yet. a koim of markets where we expected to see growth, maybe aggressive growth, we're not seeing that. we're operating well. the areas we're focused, we think we're making good progress. >> what kind of expectation do you have for the next six months, year, or is it hard to have the clarity you would like? >> with interest rates going up about 90 days ago, it definitely
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feels like the housing market, the new construction side of the housing market has gone sideways for the last 90 days. our expectation is homeowners out there looking still want to come back into this market. homeownership is a great value. we would expect to see growth in new starts next year. we would expect to see the remodel markets come along. people need to invest in their homes. a lot is overdue. we would expect to see growth in most of our core markets. >> where do you find the challenges right now overall for the industry? >> you know, i think the challenges are largely expectations. you know, we've had a couple false starts in housing, you know, three, four years ago. then we started to see fast growth in the first half of this year. i think people got enthusiastic. now we're in a softer spot. we tend to look at it in the longer term, next two, three years, we're confident in demographics, we're confident americans love to invest in their homes. and the products we make, energy efficiency products, roofings, things to make your home more
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beautiful, this is where people go in terms of investment. >> the analysts are writing about an inability to sort of, you know, exceed expectations. so, maybe we don't. i mean, if we keep going at this juncture for the next several quarters, what are you going to do to deliver shareholder value? >> well, what we've been very successful at this year is in our roofing business. we've had fabulous margin performance, our price discipline has been great. we made good progress in our insulation business in terms of pricing performance. where we've had a little disappointment has been on the volume side. you know, from an execution point of view, as long as we continue to execute, very good margin performance, very good price discipline, very good pricing activities in our markets, we think we can continue with some volume growth to expand margins and create shareholder value on the margin side. >> what about spinning off some of the businesses, this is something the analysts keep bringing up. they think this will create shareholder value. >> we have a couple analyst who is have been singing that song. the truth is owens-corning has been -- this basic portfolio of businesses for a long time. they work together exceedingly
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well. i think a couple years ago our composite business, our more global business, was the darling of analysts because housing was so weak in the u.s. now that everyone's looking to find pure playhousing stocks, i think people have become less excited about that business. but we love all of our businesses. >> do you need to get bigger to best compete with other industry players out there? i was looking at analyst reports earlier, you know, takeover in tole toledo, acquisition candidate, takeout target. are you talking to others for ponl deal? >> well, i wouldn't xhoent acom any specifics but i think if you read the text of those reports, they're saying this is a company foretremendous opportunity of shareholder creation. over the next few years you should see earnings growth and big improvement in the company. >> so, you're looking -- you're looking to stay independent? >> absolutely, absolutely. we always have been, always will be. >> thanks for being on the program. michael thaman joining us.
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herbalife out with earnings. >> let's take a look at the stock. shares are heading higher in the after-market after the company reported earnings per share on an adjusted basis of $1.41. that beats the $1.14 average analyst vichlt going in. very good earnings beat. sales coming in just in line, 1.2 $billion of sales. they also boost their full-year profit forecast. so one big reason for that jump in shares, again, a boost to full-year forecast. separately, they have announced the appointment of dr. richard carmona, former surgeon general of the united states, to its board of directors. an earnings beat, sales in line, forecast raise and former surgeon general is now a board member at herbalive. we'll bring you more details as they warrant. back over to you. >> thank you so much, dominic c chu. apple earnings out any minutes. we'll bring you the results. second day it hit wall street and the tape and while dissect
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them, get full team analysis and shareholder reaction. also ahead from billionaire to bust. it's a possible bankruptcy. he once boasted to me that he'd be richer than carlos slim and others. now eike batista's oil drilling company ogx is on the verge of bankruptcy. this incredible story of how it all went wrong. can shop around-- see who does good work and compare costs. it doesn't usually work that way with health care. but with unitedhealthcare, i get information on quality rated doctors, treatment options and estimates for how much i'll pay. that helps me, and my guys, make better decisions. i don't like guesses with my business, and definitely not with our health. innovations that work for you. that's health in numbers. unitedhealthcare. maestro of project management. baron of the build-out. you need a permit... to be this awesome.
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[ female announcer ] you're the boss of your life. in charge of making memories and keeping promises. ask your financial professional how lincoln financial can help you take charge of your future. ♪ ♪ oh, oh, all the way ♪ oh, oh welcome back. from the heights to the depths, brazilian businessman eike
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batista once boasted to me right here on "closing bell" that he was going to perhaps carlos slim on the wealth scale. now one of his flagship companies is on the verge of bankruptcy protection. >> eike batista told everyone he was going to be the world's greatest tycoon because of all the oil he was going to drill off the coast of brazil. if ever there was an avatar for brazilian boom, it was batista. followed around by paparazzi. brazilian president at his side when he unveiled a port. if you are going to be drilling so much oil, you need a big port. why not start a massive shipbuilding company to move all that oil around. his company, ogx, never found that much oil. what they did find cost too much to get out of the ground. he missed an interest payment of $1.4 million on october 1st. bankruptcy filing is expected tonight.
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look who was in the pool with him. bond funds with pimco, blackrock, loomis, just to say a few have ogx bonds that have fallen to as low as seven cents. some say these folks bought at full face value. keep in mind, one of these bonds was issued just 18 months ago. last year. another one, just two years ago. that is an incredibly rapid decline for a bond. by the way, ge invested $3 billion in ebx, his parent company. they wrote it down by a third a year later. batista declined to comment. you can check out robert frank's story up right now on cnbc.com. >> it's so extraordinary because of the rapid move. i mean, going from where he was, the 30 plus billion dollars in wealth to where he is right now happened only in about a year and a half. >> yeah. i mean, $34 billion in a year?
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it's an extraordinary amount. what's also, i think, interesting, maria, when he started to issue those bonds, there were already cracks starting to appear, and yet a lot of very sophisticated investors were still willing to buy those bonds that were unsecured. >> you know, at the end of the day, it really was the fact that he just overestimated how much oil there would be in the ground. >> for sure. >> but there's also the issue of leverage. and the issue of debt. how much of that did this play -- did that play into it? >> oh, a lot. remember, there wasn't just financial leverage. there was, what you might call, business leverage because you have the shipping company sdpentd ent on the oil company and the port company dependent on the oil company. all of these companies have debt on top of it. business leverage, synergy, some call it conflict of interest. financial leverage on top of it, then you have a recipe for disaster. >>, yeah it's a really extraordinary story. know he has not been talking. we've called him several times. at some point, you know, investors want to hear from him.
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i guess the big investors he's obviously been talking to. but what do you think he wants to say and what do investors want at this point? >> i don't know what he can say at this point. i've been told he has offered to come to new york and meet with investors and then been told, no don't do that. what they would say -- they have to do a debt workout. bottom line, get down with the gloves and figure out, where is the burden sharing going to happen, is the way it's described, because a lot of people are going to lose a lot of money. >> all right, thanks so much. apple earnings are imminent. they are out next. we'll find out if the long lines for the new iphones paid off for apple's bottom line and shareholders. our full team of analyst and shareholders will break down the numbers.
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welcome back. moments away from the fourth quarter earnings report out of apple, a big one, which will include the first weeks of sales of the newly released iphone 5s and 5c. joining us is max wolf and jmp security analyst matthew. the estimates called for a profit of $7.96 a share on
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revenue of $36.93 billion for the quarter. max, what else are going to be the highlights of this quarter? >> i think -- thanks for having me. i think we want to see the guidance. we want to see how well the 5s is doing and maybe not how well the 5c is doing. with the two weeks of data we have it's a little premature. and we want to gauge how weak the sale of ipad were before they refreshed the product a few weeks ago. >> good stuff. alex, how do you see the third quarter shaking up? >> i think max is absolutely right. in is more about the guide than about what we got in q3. a lot of people are concerned right now that maybe the 5c isn't doing do too well out of the gate. what we want to know is this wider channel, more emerging market exposure, particularly china, how is that helping the december quarter. >> i mean, going into the end of the year, are you optimistic in terms of holiday sales? you know, the last couple of years it's been all about technology. what are you expecting out of the holidays? >> maria, fundamentally jmp is
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neutral on the stock. even though the channel fill looks really good right now and we are expecting a decent print out of apple, the problem is the product cycles are coming so fast and furious. remember how exciting the galaxy s4 refresh was and how quickly that fervor refrained. we'll wonder how much demand we pulled out of q1 with the earlier china launch and we haven't seen much innovation. >> good point. max, what about the innovation? i know you said the gooid guidance is so important. do you feel we're still seeing innovation out of apple? >> i think they're holding dwron their margin and prestige and they're going to do that continuing to give up market share. on the other hand, i do think they look really good for the holiday season. it looks like the s5 and ipad with retina, or the ipad air, ipad mini with retina, are the things to get for your loved ones at the holiday.
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apple got help from samsung, there's not another product, so our guess is they'll have a strong 2013. >> alex, the stock is up 1.25% ahead of the numbers. the numbers are hitting the tape right now. revenue is out at $37.5 billion. the revenue at $37.5 billion is a little better than the expectation of $36.93 billion. the earnings per share is $8.26 a share. versus estimate of $7.96. what is your reaction to these numbers? $8.26 on $37.5 billion. >> good number. they previewed this when they talked about opening iphone weekend sales. we knew this number was going to be okay. what about the guide? we still need to see about that. how well momentum holds up into the new year. >> we want to get to josh lipton. he has the guide and then we'll come back to you. apple earnings are out. josh lipton with the numbers. as soon as the numbers came out,
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we're looking at a decline of 3%. >> looking through these numbers, let me give you the headline. it's a beat. analysts were looking for $7.96 on revenue of $36.9 billion. apple reports $8.26 on revenue of $37.5 billion. you're looking through the product segments, iphones obviously that represent 50% of total revenue. the street was looking for shipments of 32 million units. apple gives us 33.8 million. ipads, the street was looking for shipments of 14.5 million. a little light there. apple reports 14 million units. we'll keep looking through the release, maria, and get you headlines as we find them. >> doesn't look like the guidance -- well, the apple first quarter revenue $55 to $58 billion is the guidance. for the first quarter they're looking at $55 to $58 billion in revenue. and that compares to $55.7 billion expectation. first quarter revenue expectation, back with max wolf
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and alex gauna. max, how is that guide for you, $55 to $58 billion in revenue? >> that looks good. means they held consensus and back to reaccelerating growth. we're still talking about low single digits but it's better than where we had been, which was flat. so, i think that that's encouraging. and i think that was a pretty solid iphone number ahead of, as we know, an important refresh for them. nice outlook. >> max, what about you on the outlook, first quarter looking at$55 to $58 billion. >> we're pretty excited about that. that's more or less what we thought, a strong fourth quarter for us, first quarter for apple, holiday season. it's impressive they were able to sell that many ipads. it bodes well for the retina mini and the ipad air. the other interesting question people will take apart by tomorrow is how much of the $8.26 is due to the share buyback. what was it without the share
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buyback? probably closer to consensus. we got indication the 5s was selling well. we want to see the 5c. looks like a product to please everyone and may not have impressed anyone. >> you mention the buyback because this has become the source of contention and debate because carl icahn is pushing tim cook and apple executives to expand the buyback and buy back more stock. is this -- what's your take on that? do you think the company will do that? what is that impact on earnings? >> i think we're seeing them buy back shares. i think they'll continue to buy back. i think i kacahn and apple have lovie doey relationship. apple has retraced two-thirds from the low in 2012, 2013 there. i think there's tons of value, cash on book. it's an opportunity to buy a small percentage on percentage of flow of basis, be a friend with the management and be an activist in a win-win situation.
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i expect this to continue and we'll get a highlights of the share buyback contributed to the beat for the fourth quaert are quarter of apple. >> i want to get more from josh lipton. i want your take on the number of macs, ipads and iphones sold. >> when you look at the gross margin guide, maybe that could be some disappointment. apple gives gross margin guide in first quarter of 37%. the street was looking for 37.8%. perhaps some disappointment there. looking through product segments. iphones -- they shipped more than analysts predicted. ipads, though, did come in a little light. as for max, the street was looking for them to ship about 4.4 million units. they shipped 4.6 million. back to you. >> thank you. good info there, gentlemen, because when you look at the fourth quarter, 4.6 million macs sold, 14.1 million ipads, 33.8 million iphones sold. the gross margin guidance, alex,
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what's your take, 37% versus 37.8% in terms of gross margins? >> it's only a modest miss. i think that's actually an okay number for them because what it points to is after five, six sequential quarters of declines, they're now in a position where they're at least see creating modestly. that points to stabilization. i think people have looked at the android community. android community looks like it lost a step on apple which gives them breathing room for products that are now turning the corner. >> max, what's your take? >> i'm surprised at the number of pcs they sold. that's good. they're picking up market share, even ina diminishing segment. and they're selling more ipads than i thought. it looks like their mobile prowess is beginning to help them massively, not hemorrhage as quickly as everybody else in the pc business. i think the cross-channel
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between the pcs and the ios7-based mobile is interesting. it's better than expected. there's just no way they're going to keep the margins they had if they're going to try to keep their market share. that's always the $64,000 question for apple. they still haven't answered it but numbers are good. margin versus market share. eventually this company has to choose. >> and you said you are expecting a pretty good holiday season, max. >> very good, yes. all indications. >> alex, the stock is down 3% right here. looking at a decline of 1540. it's at $514. would you buy it here? i know you have a neutral rating. are you still on the sidelines? >> only if you're in it for the holiday season. i think max is right, they have the marquee lineup up right now, today. but i don't know there's much of a staying power to it. apple has been underperforming all year long. that gives it a bit of a tailwind. i'm not sure hoich the momentum will last. again, worrying about how much demand from q1 got pulled in with this earlier emerging
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market launch. still the lack of a low-cost offering in smartphones for emerging markets. >> gentlemen, stick around. we'll take a short break and then come back and continue our discussion. apple stock on the move on the heels of this latest earnings report. shareholder reaction to apple's results are next. stay with "closing bell." opportunities aren't always obvious. sometimes they just drop in. cme group can help you navigate risks and capture opportunities. we enable you to reach global markets
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back to josh lipton. >> we talked a lot about apple and a lot about carl icahn. he's been rattling those cages in cupertino. he wants them returning more to shareholders. apple committed to $60 billion buyback. mr. icahn wants more than that. they returned 7.8 billion to shareholders in q4. that was less than the prior quarter. back to you. >> thank you. apple reporting fourth quarter earnings moments ago. we have analyst reaction. we want to shift our attention to a pair of guests with skin in the game. we join scott gerber, owning apple shares, and david pearl, his firm owns about 1.25 million shares of apple and some personally as well. and back with us, alex gauna from jmp securities. good to see you guys. what is your take on the numbers? i guess, let's start with the shareholders. ross, the stock is down here in the extended hours. what's your reaction to the
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earnings report? >> i thought the earnings report was pretty good. i'm very pleased with it. they're selling a good amount of iphones and ipads and computers, which is what i was really looking at because that's been declining over the last year. but what's there to complain about? it's the best company in the world if you add it all up, in my mind. granted, i own this stock. i'm very pleased with the report so far. >> david, the guidance is being talked about. guidance of gross margins of 37% in the next quarter versus 38.7%. expectation. how are you looking at this report? >> well, let's remember, they just reiterated their guidance for this quarter a little while ago and they beat it. so, this is a company that tends to sandbag a little. so, whatever number they gave, i'd expect them to be at the high end. so, i think people are disappointed they don't have great upward guidance, but they've beaten almost the time and they just does it again. all the numbers, whether it's revenue, margin or earnings are moving in the right direction upwards.
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we can argue about the slope of the line, but it's all accelerating. you know, this stock remains at a huge discount to the market. yet, it has a high dividend, buying back shares and it's growing, frankly, faster than most of the s&p 500 companies. so you're buying a premium brand at a discount that's growing faster. >> yeah. but is it going to continue to grow faster? i mean, you're saying it's growing faster but is this faster relative to the growth rate that we've been seeing at apple in the past? >> well, they need things to reaccelerate. and asia's one of the big areas. so, we're still waiting on a deal with china mobile. there are -- china mobile sells no iphones but they have 30-plus million users who have iphones. imagine if they started selling them. i think that's going to happen within the next year, the growth and developed markets. plus, there are new products. a tv, a watch. we really think this is going to happen probably in the next 12 months.
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>> let me ask you -- actually, i want to bring in alex, because we've been talking to alex gauna at jmp securities. are you surprised the stock trades down after these numbers? >> no. i think you pointed it out earlier in the program, apple typically sels off in the news. we saw it with the iphones and now the quarter. the stock had been up in the print when the iphones came out, up 15%. we were discounting good news. i think we did get a solid quarter out of them. the problem is, we don't know how long the momentum will last. yes, we've seen a modest amount of reacceleration but they're pulling in demand from an earlier launch in china. we'll have to see without a lower cost offering, can they sustain that momentum in a very critical mooshgt. if they get china mobile and ldt rolling out there, maybe they can. >> shareholders at the table, what is your take on the carl icahn proposal.
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is that the appropriate use of cash right now? >> i don't want to see that because i don't want to see apple borrow an ungodly amount of money. long term that doesn't make sense. what carl icahn is talking about doing is just financial engineering. and it's brilliant financial engineering if you look at the earnings yield of apple versus what you can borrow at. he is right, it is a no-brainer. but the one thing tim cook absolutely has to do is get the stock price up. that will get carl icahn off his back, keep this sort of ludacris proposal at bay. if the stock goes over $600, the financial alchemy doesn't work. so, i really see that as a critical thing, is that they must get the stock price to a more reasonable market multiple. when google trades at 26, 28 times earning and facebook, twitter, all trading at 20 times revenue, apple trading at whatever number you want to say, 9 to 12 times earnings is ridiculously cheap, and that's why carl icahn's there. the guy knows how to make money.
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he's going to make money here too, i think. as well as hopefully me. >> how are they going to get stock up? are they going to get -- >> maria, the way they get the stock up is they've got to do a tv. i want a tv. what do i have to do to get an apple tv set on my wall? i'm taping my ipad to the wall at this point. what are they doing at apple? i don't know. they need a tv. that will get the stock up. >> i have another take on it, maria. i mean, again, they have -- they had over $120 billion in cash and the return in money market is just about zero. so, again, we're not advocating that they leverage themselves through the roof. but they have plenty of cash. and if you really think your stock is undervalued, buying back the shares is a great arbitrage. we really, again, think it's undervalued. you can talk about any market multiple relative to its peers. so, it's a good use of cash if they don't have a better use to grow the company.
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so, certainly we want new products. we want them to refresh products at a faster rate. but to leave cash sitting in money market fund is really not a good use of that cash, buying your shares back or paying a dividend is good. >> so you want -- you agree, then, you want that buyback increased? >> oh, yeah. they can afford to increase the buyback. no question about it. >> and dividend? >> and it would not hamper the growth. >> what would you like the dividend to look like. >> it should remain around 3%. i think that's the level at which dividend-oriented investors look at a stock. instead of looking at consumer staple stocks that grow at 1%, a utility company that barely grows, can you get apple which can get you to double digit growth over the next couple of years with a 3% dividend. >> all right. we'll leave it there. >> final word. >> remember, this cash is in the foreign markets and it's not easy to repate reate it. so the amount of cash in america increased the dye buyback dividend is somewhat limited. i do agree they should be increasing the buyback and
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paying a higher dividend. >> gentlemen, appreciate your time. want to continue looking at this apple report with the earnings out. does carl icahn ratchet up his campaign for change? we'll have guests with two different opinions on the icahn strategy and what it's doing to apple. in today's markets, a lot can happen in a second. with fidelity's guaranteed one-second trade execution, we route your order to up to 75 market centers to look for the best possible price -- maybe even better than you expected. it's all part of our goal to execute your trade in one second. i'm derrick chan of fidelity investments. our one-second trade execution is one more innovative reason serious investors are choosing fidelity. now get 200 free trades when you open an account.
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activist investor article icahn has become as much a part of the apple story of late. he is also making a case for the company to buy back $150 billion in stock. do the earnings tonight. chris is with me and agrees that apple needs to do something with the money. he doesn't need carl icahn from meddling in his strategy. after this earnings report, you still pushing? >> yes, i think it's valid. i think it's a good idea to do. companies tend to be like rock stars. when they have too much cash, it can be a problem. >> an activist investor or
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investors are saying why are you sending in all of the cash. >> and then what happens is they get pushed and make an ill times strategy. they do a poor acquisition or go into a technology that is not really going to take off. the more cash you have the, the more your risk increases. >> think aautonomy. lots of deals that have been done. >> i think a -- because they didn't have cash. that list would take us about fur years. so not having cash is its own set of risks associated with it. the other question is the product life cycle in their business, smart phones, tablets, etc., is shrinking. they can't be the company as good as they are right now, that takes a year to put out a new model if samsung takes four
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months. so i think that money needs to be used to commit to do two things. also to push out a little furter in the speed of innovation so that is less obviously incremental. i don't think that buying the largest amount of your shares back in history solves those problems. it's a short term pop in the stock but in a long term stock it probably requires more of a long game strategy. >> it's interesting to note that much of the cash is overseasment one of our guests earlier mentioned the fact that you have to repateuate that money and there are taxes involved. >> i think apple has a capability to borrow more money.
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they are far from insolvent. they're a cash machine. bondholders would love to buy apple. >> does this bring the company back to the glory years of steve jobs? >> i think it benefits the shareholder shareholders apple is now a mature company. i think that carl icahn is stepping up. making sure that the ceo has a fiduciary responsibility. >> should a company with this much cash on hand be borrowing. >> is it more efficient to borrow money here in the u.s. and leave the cash off shore? unfortunately under current tax policy, that's probably the best move.
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>> apple is a little bit caught up in this discussion. we all believe that eventually we will get to a 25% corporate rate. but i do think that in the long term, getting that product life cycle down and restoring the market's faith in their innovation probably does a lot more for their stock than a bigger buy back program. keep in mind they already have a record breaking buy back program in place. >> since carl icahn has gotten involved, is he on to something here? >> having them always moves it higher for a while. he certainly picked a good moment. he is is a very smart investor. i don't think it's bad to have them suggesting. when he says stuff is good for the stock it's good for him, when he makes the money the market makes money but on the base level the $150 million could be spent a different way.
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>> all right guys. good information. we will see you soon. we want to look at any other headlines op apple. he has got more on this report out tonight. over to you. >> i know earlier you were talking with your guests about the importance of china to this story. there is traders, investors and analysts who think a possible deal would be the next potential can't list. greater china revenue was up 24%. maybe not surprising given that iphone launch up 6% year-over-year. >> stay with us. a short break and then we will come back. stay with us.
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>> welcome back. busy night here. as you can see after recording their latest fourth quarter earnings that will likely set the tone for tomorrow, the stock coming -- trading up ahead of the numbers and then down after the numbers were release d rest of the quarter pretty flat and
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on standstill ahead of the fed meeting this week. the dow industrial down. new al time closing high. that will do it for the closing bell. thanks so much for joining us. >> our traders tonight are pete and john and guy. let's get straight take a look at the move in the stock. it is lower in the afterhour sessions. gross margin guidance was the problem coming in below the street's expectations. pete, what is your interp p pres of this quarter? >> e